How to make profit by renting property???

MrBoost_2

hi ppl
total newbie here hence the very newbie question
Im in australia so im gonna have to use my currency, im sure you can relate tho.. ill try and make this quick
Basically assuming you buy a property here for $250,000au, the loan repayments work out to be about $400 weekly, now a house of that vlue wouldnt be very spectacular and may fetch anything from 200 to only 300 a week, so with the extra amount owing just on the repayments, how are you making a profit???
I read about some ppl buying property and renting it out and the rent pays for the repayments and they have some profit on top! i dont see how it works tho in the real world with what ive posted above?

lynzpower

I guess depends on what the interest rate is. Here if you bought a property for 250k the interest only repayment might be about ( at 6% interest rate for interest only mortgage - do you have those there) about 1250. If you get 400 a week, then you are in *profit* of £350.

However, here in the UK, you'd be pretty unlikely to find a 250k property that would achieve 1600 a month IYSWIM.

meanmachine_2

Don't know about Australia, but you can rarely find a property these days that you can rent at 125% of the IO mortgage.

People make the mistake of deducting the deposit, ignoring opportunity costs (the interest you would otherwise get were the money invested elsewhere).

That's why, by any rental measure, property is "overvalued".

But in Britain, we're stupid, so continue to put a premium on home ownership.

Some speculators believe they can still get property BMV, below market value. But in today's more bullish market, I expect that's fairly rare.

EDIT: If you think that's bad, take a look at the Dublin market. There rents are nowhere near 125% of the IO repayments. That bubble is heading for a very messy finish.